If you’re considering starting a business with a partner and hoping for success, we’ve gathered 10 essential tips to help navigate the journey.
Whether your partner is a close friend, family member, or even a significant other, there’s much to consider before sealing the deal.
Likewise, we’ve also included some important questions to ask yourself before entering a business partnership.
Table of contents
- Recognize personal feelings don’t always equate to potential
- Understand each other’s habits with money and time
- Make time for the relationship outside of a business setting
- Check if this is someone you can sincerely confide in
- Account for any gossip that may occur
- Note if they’re someone you trust with big responsibilities
- Test how well you two resolve conflicts together
- Be sure to avoid any practices implying nepotism
- Set clear expectations for dividing tasks
- Have a plan of action should the business dissolve
- Pros and cons of building a partnership
- 5 key questions to ask yourself before getting started
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Last updated: Mar 20231. Recognize personal feelings don’t always equate to potential
If this person is someone you consider to be very close, you likely think fondly of them. However, having a business partner takes more than friendship. Your business success will depend on how well your partnership functions. Liking them for who they are doesn’t always mean they will make the best business partner.
If they are someone you’ve previously been able to trust with confidential information or are someone you regularly turn to for advice on money or career moves, these are a couple of green flags to look for!
2. Understand each other’s habits with money and time
Being business owners requires discipline. Successful entrepreneurs know not only how to manage their time but also their money. If your partner is someone who hasn’t refined these skills or lacks them entirely, you should reconsider if they should be a part of your new business. If your partner is someone you know consistently keeps themselves on track and handles their finances competently, take this as a good sign.
A financially fit partner is someone who tracks their spending, budgets their recurring expenses while planning for potential emergencies, and does not put their finances on the back burner. A partner with excellent time management is someone who sets both long- and short-term goals, manages their stress well, and maintains a routine to keep up their productivity.
If your potential partner struggles with these skills, but you’d still like to involve them in the business, give them a role better suited to their strengths.
3. Make time for the relationship outside of a business setting
A business partnership is a relationship that will take up a significant portion of both your schedules. Despite this, the business shouldn’t be the only setting you interact in, especially if this is someone you’ve known for a long time. Your relationship should continue to be a part of your personal life.
Prioritize spending time in settings completely unrelated to business. Limit the amount of business banter when you get together in these settings to avoid mixing business and pleasure to an unhealthy extent.
4. Check if this is someone you can sincerely confide in
The inner workings of a business venture and money-related topics are highly sensitive. Your partner should be someone you can trust to be discreet and handle internal matters with care.
You shouldn’t have to worry whether your potential partner is at risk for sharing confidential information without your knowledge.
If this person is someone you regularly turn to for advice or they’re the first one you share the big news with, this is likely a person you can confide business matters in. If you rarely feel comforted or supported by the advice of your potential business partner, this trait can lead to bigger company issues down the road.
5. Account for any gossip that may occur
It’s likely you and your partner share similar social circles. While it’s completely normal for friends and family to discuss what’s going on in each other’s lives, try to keep business matters private.
If your partner wants to run anything by an outsider, be sure to discuss whether you're comfortable with the receiving party.
Likewise, be sure to monitor your business's social media presence should you start a profile. A professional brand and public image make all the difference.
6. Note if they’re someone you trust with big responsibilities
Starting a business relationship feels exciting since you’ll have someone you know well by your side through it all. The trials of starting a business, however, are not something everyone is equipped to handle.
Be sure you know exactly how this person handles significant responsibilities before entering a business partnership with them.
Are they someone who regularly shows up late or misses meetings? Have they been known to lose track of sensitive documents or items?
These are a couple of indicators your potential business partner may not be ready for what it takes to have their own business.
7. Test how well you two resolve conflicts together
Disagreements and arguments are likely to take place when building a partnership. Instead of focusing on how to avoid them altogether, flesh out some helpful conflict resolution tactics. Have a conversation where you both discuss how you prefer to give and receive communication in situations like these.
Some example situations to run through with your partner are if either one of you goes over budget with a project, misses a deadline, or fails to secure a prospective investor.
8. Be sure to avoid any practices implying nepotism
If you’ve decided to bring on a family member as a partner, recognize that nepotism can sour professional dynamics quickly. Even though this person is family, they should not receive preferential treatment in the workplace, especially once your team grows.
Some common instances of nepotism include hiring without relevant experience, promotions without merit, and giving additional perks others at the same level do not receive.
9. Set clear expectations for dividing tasks
In any workplace, everyone involved has their specific role. Their job description dictates their day-to-day tasks and what’s expected of them. You should implement this same structure in your new partnership. You should clearly and explicitly outline the responsibilities of each partner.
Ideally, you'll find someone who has complementary skills to yours. Discuss your strengths and weaknesses to divide and conquer the duties at hand. If you have more experience crunching numbers, maybe you handle accounting matters. If your partner is a client relations expert, consider delegating those responsibilities onto their plate.
10. Have a plan of action should the business dissolve
While you’re thinking about how to start a business with a partner, it may be helpful to plan for the possibility of your company needing to be dissolved. Of course, your goal is to avoid this entirely, but have your bases covered if it happens.
Clearly outline how assets, profit, and other intangible aspects of your business will be divided and give yourself a clear buy out or exit strategy.
What working in a partnership entails
In many ways, a business partnership is not much different from a personal relationship. A thriving partnership will entail good communication skills, having similar short- and long-term goals, and significant trust. If these qualities are not present, then it’s likely the partnership will struggle.
Entrepreneurship isn't for everyone, but if you carefully consider the relevant tips and questions listed here, you'll be headed in the right direction.
Types of business partnerships
Deciding to start a business with a partner also entails ironing out how your partnership will be defined legally. There are a few different kinds of partnerships outlined below.
Carefully consider which business structure would be best suited for you and your business partner.
Limited Liability Company (LLC)
An LLC has multiple members who own the company. Members are typically not held liable for any debt the company accrues or any infractions they sustain.
However, members have personal liability for the actions of other members, especially when their actions directly impact the company.
Limited Partnership (LP)
An LP typically requires at least two members involved, one limited partner and one general partner. The limited partner usually provides capital at the start but does not run the day-to-day.
A general partner manages the business operations and does all major decision-making. Since they’re calling all the shots, the general partner can be held liable for any actions the company or its members take. The limited partner cannot be held responsible.
Limited Liability Partnership (LLP)
In an LLP, members usually will not be held liable for the debt and legal matters the company encounters or the actions of other members. Members can still be held accountable for any personal violations or carelessness.
General Partnership (GP)
A GP is an informal partnership agreement between members wanting to start a business together. While a great benefit is saving the time and hassle of finalizing a legal agreement and formally registering with the state, a GP offers no legal protection for the members involved.
Members are personally at risk for the company’s debt and the actions of the others involved.
Pros and cons of building a partnership
Now having explored the different types of partnerships, let's explore the partnership business pros and cons. After you've chosen the best-fitted business plan and operating agreement, weigh out the advantages and disadvantages below.
Pros
- Dividing responsibilities based on unique specialties and skillsets
- Will always have a colleague to collaborate with and bounce ideas off of
- Having someone to motivate you and constantly push you to grow
Cons
- Disagreements are likely and potentially challenging to navigate depending on the relationship
- Finding a way to split ownership and profit everyone agrees with
- Competing, potentially incompatible work ethic between individual partners
5 key questions to ask yourself before getting started
Entering a business partnership is a decision that requires a lot of careful consideration. It’s not something you want to jump into blindly. Before making the final call, ask yourself the following questions to be sure of your next steps.
- Is this person someone you can trust even outside of business matters?
- Do you both share the same vision and values when it comes to the business?
- Have you discussed each partner’s preferred communication style and methods for conflict resolution?
- Have you divvied up responsibilities so everyone knows their role?
- Have you discussed how to maintain a healthy relationship outside of the business?
Starting a business with a partner is an exciting step forward. A solid entrepreneurial relationship can be a great career-builder. If you’re looking to stay flexible, consider an entirely online business.
Last updated: Mar 2023Start your LLC the easy way
Forming your LLC is a checkbox that needs to be ticked. Easy, fast and worry-free. We reviewed the 13 most popular LLC formation services to figure out who truly understands what new founders need. Our recommendation:
We don’t make up scores.
Best LLC Service 2022
- Formed 1,000,000+ LLCs
- $39 formation includes registered agent service
- Fast formation & same day filing
- Exceptional customer reviews
Last updated: Mar 2023